WASHINGTON — State financial regulators have released a new framework aimed at helping examiners evaluate how banks and nonbank financial institutions are using artificial intelligence and the risks associated with the technology.
The Conference of State Bank Supervisors said its Artificial Intelligence Supervisory Framework is designed to give state examiners a principles-based approach for identifying and understanding the use of AI at state-chartered banks and state-licensed nonbank financial institutions.
CSBS said the publicly available framework also is intended to give regulated institutions greater clarity about the questions examiners may ask and the information they may request regarding AI-based products, services and tools.
“The use of AI provides a powerful new tool for financial institutions to improve services, protect consumers, and increase operating efficiency,” CSBS President and CEO Brandon Milhorn said in announcing the framework.
‘Principles-Based Approach’
Milhorn said that while new technologies can introduce risks, the framework provides a principles-based approach to governance that is intended to help financial institutions explore and implement AI with greater confidence.
According to CSBS, the framework is a discretionary supervisory tool rather than a uniform examination requirement. It can be used by state examiners to identify how an institution is employing AI, assess the risks associated with those uses and determine when a more extensive review may be warranted using existing supervisory resources.
The framework is designed to account for differences among financial institutions, including their size, complexity, risk profiles and the extent and nature of their AI use, CSBS said.
It draws on several existing AI risk-management resources, including the National Institute of Standards and Technology’s AI Risk Management Framework, the Cyber Risk Institute’s Financial Services AI Risk Management Framework and the U.S. Department of the Treasury’s AI Lexicon.
Framework Also Intended for Financial Institutions
CSBS said the framework is not limited to examiners. Banks and other regulated financial institutions can use it to evaluate their own AI programs, develop governance and risk-management practices and prepare for regulatory examinations.
The framework is intended to provide institutions with insight into the general approach state examiners may take, the types of questions they could ask and the information they could seek about AI products, services and tools.
CSBS said individual state financial regulatory agencies will decide whether, and to what extent, they incorporate the framework into their supervisory programs.
The framework was approved in August by the CSBS State Supervisory Processes Committee and NonDepository Supervisory Committee and was publicly released Sept. 16.
